FRANCE-CAREFOUR TRADE SLOWING..
The new CEO of Carrefour SA said Thursday he plans to increase discounting to win cash-strapped customers and gain market share in France after the company reported a 45 percent slide in 2008 net profit.
Lars Olofsson, appointed last year to improve performance at the world’s No. 2 retailer, said he will spend euro600 million ($767.16 million) on promotions and other discounting to improve the company’s image on price. Carrefour is seen as more expensive than it actually is, he said.
"Carrefour is a big brand but it is a weakened brand," he said in a presentation of his plans for the company that was big on concept but short on detail.
Second only to U.S.-based Wal-Mart Stores Inc. among the world’s biggest retailers, Carrefour said 2008 net profit fell to euro1.27 billion from euro2.30 billion a year earlier.
Sales rose 5.9 percent _ or 6.4 percent at constant exchange rates _ to euro86.97 billion. What Carrefour calls activity contribution, or operating profit, rose 0.3 percent to euro3.3 billion.
The results are in line with a revised December forecast, which came after Carrefour cut its full year targets for the second time.
Carrefour shares were trading 4.1 percent higher at euro25.68 in Paris afternoon trading.
After two months on the job, Olofsson said his priority is to improve performance in France, which accounts for about 40 percent of Carrefour’s sales.. It operates over 5,500 stores here, including hypermarkets, supermarkets, deep discount stores and convenience shops.
"There will be no lasting success if we are not strong in our base," the former Nestle SA executive said. "France is at the heart of Carrefour."
A promotional campaign will be launched in France in coming weeks cutting prices on 4,500 items by 10 percent. Coupons will also be handed out at the door offering bigger reductions in a lottery system, he said.
He also wants to shakeup the hypermarket concept that he said Carrefour invented, without saying how. Hypermarkets sell everything from television sets to yoghurts, and were hit in the fourth quarter as customers held back on nonfood spending.
Carrefour management is also working on ways to accelerate its hard discount offer, he said, adding that the performance of budget stores Ed is not satisfactory.
Asked about plans for a new low cost Carrefour branded range of products, he said an announcement will be made in April.
Carrefour also plans to cut costs by euro500 this year and limit spending to maintain or upgrade assets at euro2.5 billion.
Carrefour is present in 30 countries, and after France, Olofsson said he wants to boost sales in Spain, Italy and Belgium and expand in the growing markets of China, India, Russia and Brazil.
More detailed plans will be announced in June, he said.
Looking ahead CFO Eric Reiss said Carrefour expects the environment to "remain difficult in 2009."
Sales in France held up in January and February, but slowed in Spain and China, he said in a conference call.
The company didn’t give an earnings forecast.